SEOUL, Dec. 21 (Korea Bizwire) – South Korea’s economic growth rate will likely slow to 2.5 percent in 2016 due to a continued export slump and weakening domestic consumption, a leading private think tank forecast Sunday.
The prediction by the LG Economic Research Institute (LGERI) marks a 0.2 percentage point drop from its earlier estimate made in September.
LGERI’s revised growth projection is also lower than the government’s 3.1 percent estimate for next year and the Bank of Korea’s 3.2 percent forecast.
The think tank, however, retained its 2015 growth forecast for Asia’s fourth-largest economy at 2.6 percent.
“South Korea’s exports are expected to remain in the doldrums in the coming year,” the LGERI said. “Domestic demand’s contribution to growth is also likely to weaken gradually.”
The think tank projected South Korea’s customs-cleared exports to decline 0.7 percent in 2016 from this year because of a U.S. economic slowdown, China’s cooling economy, and a downturn in prices of oil and other raw materials.
In addition, private consumption and construction investment are unlikely to continue their recovery pace next year due to the country’s population aging and low expectations for long-term economic growth, it added.
The LGERI forecast the global economy to grow 2.9 percent in 2016, compared with a 3.1 percent expansion this year.
The United States is likely to see its growth drop to 2.1 percent next year from 2.5 percent in 2015 because of a strong dollar and weak consumer spending, with China’s growth rate expected to fall to 6.5 percent from 6.9 percent owing to the sluggish manufacturing and construction sectors, it added.